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Regulation Versus Taxation

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  • Alberto F. Alesina
  • Francesco Passarelli

Abstract

We study which policy tool and at what level a majority chooses in order to reduce activities with negative externalities. We consider three instruments: a rule, that sets an upper limit to the activity which produces the negative externality, a quota that forces a proportional reduction of the activity, and a proportional tax on it. For all instruments the majority chooses levels which are too restrictive when the activity is performed mainly by a small fraction of the population, and when costs for reducing activities or paying taxes are sufficiently convex. Also a majority may prefer an instrument different than what a social planner would choose; for instance a rule when the social planner would choose a tax.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 16413.

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Date of creation: Sep 2010
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Handle: RePEc:nbr:nberwo:16413

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Citations

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Cited by:
  1. Di Giannatale, Paolo & Passarelli, Francesco, 2013. "Voting chances instead of voting weights," Mathematical Social Sciences, Elsevier, vol. 65(3), pages 164-173.
  2. Leonzio Rizzo & Alejandro Esteller - Moré, 2011. "US Excise Tax Horizontal Interdependence: Yardstick vs. Tax Competition," Working Papers 201116, University of Ferrara, Department of Economics.
  3. M. Gallastegui & M. González-Eguino & I. Galarraga, 2012. "Cost effectiveness of a combination of instruments for global warming: a quantitative approach for Spain," SERIEs, Spanish Economic Association, vol. 3(1), pages 111-132, March.
  4. Carlo Bollino & Silvia Micheli, 2012. "On the Relative Optimality of Environmental Policy Instruments: An Application of the Work of Alberto Alesina," Atlantic Economic Journal, International Atlantic Economic Society, vol. 40(4), pages 385-399, December.
  5. Donato Masciandaro, Francesco Passarelli, 2011. "Financial Systemic Risk: Taxation or Regulation?," ISLA Working Papers 41, ISLA, Centre for research on Latin American Studies and Transition Economies, Universita' Bocconi, Milano, Italy.
  6. Francesco Forte, 2012. "The New Macro Political Economy of Alberto Alesina," Atlantic Economic Journal, International Atlantic Economic Society, vol. 40(4), pages 417-428, December.

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